Built to Last: Successful Habits of Visionary Companies
Encyclopedia
Built to Last: Successful Habits of Visionary Companies is a book written by Jim Collins
and Jerry I. Porras
on October 26, 1994. The book outlines the results of a six-year research project into what makes enduring great companies. Two primary objectives for the authors’ research were: “to identify underlying characteristics are common to highly visionary companies” and “to effectively communicate findings so they can influence management.” The research conducted by Collins and Porras and articulated in Built to Last is presented with examples based on stories and validated by research data. The book is "one of the most influential business books of our era"
, is widely admired by knowledgeable businesspeople, made an imprint on the world, had multiple generations of Chief executive officer
s (CEOs), had multiple product/service life cycles, and was founded before 1950. The list of visionary companies was determined based on the results of a survey of 1,000 CEOs. The authors ensured representation across all industries and various sized organizations by sampling from Fortune 500
industrial companies, Fortune 500 service companies, Inc
. 500 private companies and Inc. 100 public companies. The survey yielded a 23% response rate with 3.2 companies listed per response. An important caveat the authors express is the fact that through their research, they can claim a correlation, not a causal link between their findings and the success of companies.
These companies have taken leadership roles in their industries, offering innovative products and services and consistently outsmarting rivals. What made the research particularly useful and interesting is that Collins and Porras compared and contrasted these visionary companies with a control set of rivals. For instance, Boeing was compared and contrasted with Douglas Aircraft, Marriott was compared and contrasted with Howard Johnson's
, and Merck was compared and contrasted with Pfizer
. The findings are based on what the visionary companies do that is different than close competitors who have achieved a high level of success, but not to the extent of the visionary companies. From 1926 through 1990 the comparison companies outperformed the general stock market
by 2 times whereas the visionary companies outperformed the market by 15 times.
. Co-author Jim Collins
became a "superstar" among M.B.A.'s and used his share of the profits to "set up his own research center in in Boulder, Colo., staffed with a team of grad students who tackle multiyear research projects aimed at answering big-business questions." This research ultimately led to subsequent books such as Good to Great
.
has subsequently argued that "The books never promised that these companies would always be great, just that they were once great."
James C. Collins
James C. "Jim" Collins, III is an American business consultant, author, and lecturer on the subject of company sustainability and growth. Jim Collins frequently contributes to Harvard Business Review, Business Week, Fortune and other magazines, journals, etc...
and Jerry I. Porras
Jerry I. Porras
Jerry I. Porras is a professor at Stanford University Graduate School of Business and Lane Professor Emeritus of Organizational Behavior and Change....
on October 26, 1994. The book outlines the results of a six-year research project into what makes enduring great companies. Two primary objectives for the authors’ research were: “to identify underlying characteristics are common to highly visionary companies” and “to effectively communicate findings so they can influence management.” The research conducted by Collins and Porras and articulated in Built to Last is presented with examples based on stories and validated by research data. The book is "one of the most influential business books of our era"
Visionary defined
Collins and Porras listed a total of eighteen companies they identified as ‘visionary.’ They defined a visionary company as one that is a premier institution in its industryIndustry
Industry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...
, is widely admired by knowledgeable businesspeople, made an imprint on the world, had multiple generations of Chief executive officer
Chief executive officer
A chief executive officer , managing director , Executive Director for non-profit organizations, or chief executive is the highest-ranking corporate officer or administrator in charge of total management of an organization...
s (CEOs), had multiple product/service life cycles, and was founded before 1950. The list of visionary companies was determined based on the results of a survey of 1,000 CEOs. The authors ensured representation across all industries and various sized organizations by sampling from Fortune 500
Fortune 500
The Fortune 500 is an annual list compiled and published by Fortune magazine that ranks the top 500 U.S. closely held and public corporations as ranked by their gross revenue after adjustments made by Fortune to exclude the impact of excise taxes companies collect. The list includes publicly and...
industrial companies, Fortune 500 service companies, Inc
Inc. (magazine)
Inc. magazine, founded in 1979 and based in New York City, is a monthly publication focused on growing companies. The magazine publishes an annual list of the 500 fastest-growing private companies in the U.S., the "Inc...
. 500 private companies and Inc. 100 public companies. The survey yielded a 23% response rate with 3.2 companies listed per response. An important caveat the authors express is the fact that through their research, they can claim a correlation, not a causal link between their findings and the success of companies.
Companies identified
The list of eighteen companies identified as visionary:- 3M3M3M Company , formerly known as the Minnesota Mining and Manufacturing Company, is an American multinational conglomerate corporation based in Maplewood, Minnesota, United States....
- American ExpressAmerican ExpressAmerican Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
- BoeingBoeingThe Boeing Company is an American multinational aerospace and defense corporation, founded in 1916 by William E. Boeing in Seattle, Washington. Boeing has expanded over the years, merging with McDonnell Douglas in 1997. Boeing Corporate headquarters has been in Chicago, Illinois since 2001...
- Citicorp (now CitigroupCitigroupCitigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
) - Disney
- Ford
- General ElectricGeneral ElectricGeneral Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
- Hewlett Packard
- IBMIBMInternational Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
- Johnson & JohnsonJohnson & JohnsonJohnson & Johnson is an American multinational pharmaceutical, medical devices and consumer packaged goods manufacturer founded in 1886. Its common stock is a component of the Dow Jones Industrial Average and the company is listed among the Fortune 500....
- MarriottMarriott InternationalMarriott International, Inc. is a worldwide operator and franchisor of a broad portfolio of hotels and related lodging facilities. Founded by J. Willard Marriott, the company is now led by son J.W. Marriott, Jr...
- MerckMerck & Co.Merck & Co., Inc. , also known as Merck Sharp & Dohme or MSD outside the United States and Canada, is one of the largest pharmaceutical companies in the world. The Merck headquarters is located in Whitehouse Station, New Jersey, an unincorporated area in Readington Township...
- MotorolaMotorolaMotorola, Inc. was an American multinational telecommunications company based in Schaumburg, Illinois, which was eventually divided into two independent public companies, Motorola Mobility and Motorola Solutions on January 4, 2011, after losing $4.3 billion from 2007 to 2009...
- NordstromNordstromNordstrom, Inc. is an upscale department store chain in the United States, founded by John W. Nordstrom and Carl F. Wallin. Initially a shoe retailer, the company today also sells clothing, accessories, handbags, jewelry, cosmetics, fragrances, and in some locations, home furnishings...
- Philip Morris (now Altria)
- Procter & GambleProcter & GambleProcter & Gamble is a Fortune 500 American multinational corporation headquartered in downtown Cincinnati, Ohio and manufactures a wide range of consumer goods....
- SonySony, commonly referred to as Sony, is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo, Japan and the world's fifth largest media conglomerate measured by revenues....
- Wal-MartWal-MartWal-Mart Stores, Inc. , branded as Walmart since 2008 and Wal-Mart before then, is an American public multinational corporation that runs chains of large discount department stores and warehouse stores. The company is the world's 18th largest public corporation, according to the Forbes Global 2000...
These companies have taken leadership roles in their industries, offering innovative products and services and consistently outsmarting rivals. What made the research particularly useful and interesting is that Collins and Porras compared and contrasted these visionary companies with a control set of rivals. For instance, Boeing was compared and contrasted with Douglas Aircraft, Marriott was compared and contrasted with Howard Johnson's
Howard Johnson's
Howard Johnson's is a chain of hotels and restaurants, located primarily throughout the United States and Canada. Throughout the 1960s and 1970s, Howard Johnson's was the largest restaurant chain in the United States, with over 1,000 restaurants...
, and Merck was compared and contrasted with Pfizer
Pfizer
Pfizer, Inc. is an American multinational pharmaceutical corporation. The company is based in New York City, New York with its research headquarters in Groton, Connecticut, United States...
. The findings are based on what the visionary companies do that is different than close competitors who have achieved a high level of success, but not to the extent of the visionary companies. From 1926 through 1990 the comparison companies outperformed the general stock market
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
by 2 times whereas the visionary companies outperformed the market by 15 times.
Impact
Built to Last has influenced many executives and entrepreneurs since it was originally published, including Red HatRed Hat
Red Hat, Inc. is an S&P 500 company in the free and open source software sector, and a major Linux distribution vendor. Founded in 1993, Red Hat has its corporate headquarters in Raleigh, North Carolina with satellite offices worldwide....
. Co-author Jim Collins
James C. Collins
James C. "Jim" Collins, III is an American business consultant, author, and lecturer on the subject of company sustainability and growth. Jim Collins frequently contributes to Harvard Business Review, Business Week, Fortune and other magazines, journals, etc...
became a "superstar" among M.B.A.'s and used his share of the profits to "set up his own research center in in Boulder, Colo., staffed with a team of grad students who tackle multiyear research projects aimed at answering big-business questions." This research ultimately led to subsequent books such as Good to Great
Good to Great
Good to Great: Why Some Companies Make the Leap... and Others Don't is a 2001 management book by James C. Collins that aims to describe how companies transition from being average companies to great companies and how companies can fail to make the transition...
.
Criticism
Built to Last has been criticized for the fact that many of the companies it profiled have subsequently faltered. However, author Jim CollinsJames C. Collins
James C. "Jim" Collins, III is an American business consultant, author, and lecturer on the subject of company sustainability and growth. Jim Collins frequently contributes to Harvard Business Review, Business Week, Fortune and other magazines, journals, etc...
has subsequently argued that "The books never promised that these companies would always be great, just that they were once great."
See also
- Enduring Success
- Good to GreatGood to GreatGood to Great: Why Some Companies Make the Leap... and Others Don't is a 2001 management book by James C. Collins that aims to describe how companies transition from being average companies to great companies and how companies can fail to make the transition...
- In Search of ExcellenceIn Search of ExcellenceIn Search of Excellence is an international bestselling book written by Tom Peters and Robert H. Waterman, Jr.. First published in 1982, it is one of the biggest selling and most widely read business books ever, selling 3 million copies in its first four years, and being the most widely held...
- The Halo EffectThe Halo Effect (business book)The Halo Effect is a 2007 book by business academic Phil Rosenzweig that criticizes pseudoscientific tendencies in the explanation of business performance. As well as many business magazines and newspapers, it targets specific books and academic research published by business schools...
External links
- Was Built To Last Built To Last? Article on FastCompany about the performance of Built To Last Companies in the last 10 years.